Income Taxes

3 Months Ended

Apr. 01, 2023

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 11. Income Taxes

The following table provides details of income taxes:

	Three Months Ended
	April 1,			April 2,
	2023			2022
Income before income taxes	$	32,202		$	58,917
Provision for income taxes	$	3,134		$	5,587
Effective tax rate		10	%		9	%

The income tax provision for the three months ended April 1, 2023 was computed based on the Company’s annual forecast of profit by jurisdiction and forecasted effective tax rate for the year. The income tax provision for the three months ended April 1, 2023 and April 2, 2022 reflected the impact of a change in U.S. tax law effective January 1, 2022, which requires the capitalization and amortization of research and development expenditures incurred after December 31, 2021. The decrease in the Company’s income tax provision for the three months ended April 1, 2023 as compared to the three months ended April 2, 2022 was primarily due to a decrease in quarterly earnings and an increase in the federal research and development tax credit,

offset by a decrease in the Foreign Derived Intangible Income (“FDII”) deduction. The Company’s recorded effective tax rate for the periods presented is less than the U.S. statutory rate primarily due to projected FDII deductions, federal research and development tax credits, and excess tax benefits associated with equity compensation.

The Company currently has a partial valuation allowance recorded against certain foreign and state net operating loss and credit carryforwards where the realizability of such deferred tax assets is substantially in doubt. Each quarter, the Company assesses the likelihood that it will be able to recover its deferred tax assets. The Company considers available evidence, both positive and negative, including forecasted earnings, in assessing its need for a valuation allowance. As a result of the Company’s analysis, it concluded that it is more likely than not that a portion of its deferred tax assets will not be realized. Therefore, the Company continues to provide a valuation allowance against certain deferred tax assets. The Company continues to monitor available evidence and may reverse some or all of its remaining valuation allowance in future periods, if appropriate. The Company has a recorded valuation allowance against a certain portion of its deferred tax assets of $11,473 and $11,772 for the quarter ending April 1, 2023 and December 31, 2022, respectively.